Correlation Between LB Foster and Fidus Investment
Can any of the company-specific risk be diversified away by investing in both LB Foster and Fidus Investment at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining LB Foster and Fidus Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and Fidus Investment Corp, you can compare the effects of market volatilities on LB Foster and Fidus Investment and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in LB Foster with a short position of Fidus Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Fidus Investment.
Diversification Opportunities for LB Foster and Fidus Investment
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FSTR and Fidus is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Fidus Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidus Investment Corp and LB Foster is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on LB Foster are associated (or correlated) with Fidus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidus Investment Corp has no effect on the direction of LB Foster i.e., LB Foster and Fidus Investment go up and down completely randomly.
Pair Corralation between LB Foster and Fidus Investment
Given the investment horizon of 90 days LB Foster is expected to generate 3.5 times more return on investment than Fidus Investment. However, LB Foster is 3.5 times more volatile than Fidus Investment Corp. It trades about 0.09 of its potential returns per unit of risk. Fidus Investment Corp is currently generating about 0.08 per unit of risk. If you would invest 1,400 in LB Foster on September 12, 2024 and sell it today you would earn a total of 1,462 from holding LB Foster or generate 104.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LB Foster vs. Fidus Investment Corp
Performance |
| Timeline |
| LB Foster |
| Fidus Investment Corp |
LB Foster and Fidus Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and Fidus Investment
The main advantage of trading using opposite LB Foster and Fidus Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, Fidus Investment can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fidus Investment will offset losses from the drop in Fidus Investment's long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| Fidus Investment vs. Gladstone Investment | Fidus Investment vs. Horizon Technology Finance | Fidus Investment vs. Stellus Capital Investment | Fidus Investment vs. Prospect Capital |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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